The Government introduced legislation making amendments to National Disability Insurance Scheme (NDIS) during Budget Week.
A well written explanatory memorandum explains the background to the provisions.
It particularly says:
The Bill addresses two key vulnerabilities. First, the NDIS is currently growing at a rate that was unforeseen when it was established in 2013 under the National Disability Insurance Scheme Act 2013 (the Act). If left unchecked, this puts the long term sustainability of the NDIS at risk. This Bill includes important changes to improve the quality of NDIS supports for participants and put the Scheme on a more sustainable footing, now and for future generations.
Second, over time the NDIS has become the target for fraudulent activity, impacting the Scheme as a whole. Fraud has a direct and devastating impact on the lives of participants and their families, leading to lower quality services, exploitation and harm. The National Disability Insurance Agency (Agency) does not have the necessary powers to regulate and monitor the payment of over $50 billion per year.[1]
It is designed to ‘put the NDIS back on a sustainable footing now and into the future’ with the Explanatory Memorandum suggesting the measures will go towards reducing annual cost growth increases for the scheme to 5 to 6 per cent ‘or lower[2] through removing 160,000 people from the NDIS rolls as well as reducing levels of perceived fraud.
From a technical perspective, it is designed to overcome Federal Court cases such as, in particular, National Disability Insurance Agency v Davis, which according to the explanatory memorandum found:
The decision in Davis interpreted several key terms used to determine if a participants impairment(s) are permanent in a way that differed from how they were intended to operate. Prior to the Court’s decision, ‘permanent’ impairment had been interpreted as meaning an impairment that was ‘irreversible’ in nature after having received the ‘optimal duration and type of treatment’, notwithstanding the impairment may also be episodic or fluctuating. In its decision, the court interpreted ‘permanent’ to mean enduring rather than ‘irreversible’; ‘remedy’ was interpreted to mean something approaching a ‘removal’ or ‘cure’ of an impairment rather than something that would ‘relieve’ or ‘improve’ an impairment; ‘available’ was interpreted to mean a treatment that a participant can in reality access having regard to cost and location; ‘appropriate’ treatment was interpreted to mean treatment which had the capacity to ‘remedy’ an impairment and is suitable to be undertaken by the individual; and ‘known’ treatment was interpreted to mean treatment identified by a medical practitioner, and suitable to a person’s particular impairment.[3]
It also proposed to wind back decisions which expanded the concept of ‘reasonable and necessary’. Examples given in the explanatory memorandum as cases delivering an ‘undesirable expansion’ of the scheme were:
McGarrigle v NDIA (2017) – the decision appealed was the NDIA’s decision to fund only 75 per cent of Mr McGarrigle’s taxi expenses based on family members providing assistance with getting to and from medical appointments. The Federal Court found that the NDIS must fully fund any support that meets reasonable and necessary criteria, and that partial funding is not permitted on the grounds of family contributions or Scheme sustainability considerations.
NDIA v WRMF (2020) – the Federal Court found the NDIA could not rely on policy or assumptions about an individual’s capacity or community willingness to pay for supports to decline an otherwise reasonable and necessary support. It also confirmed that value for money and Scheme sustainability considerations were participant specific, not Scheme wide.
NDIA v Eastham (2026) – the Federal Court established that despite the intent of the National Disability Scheme Amendment (Getting the NDIS Back on Track No.1) Act 2024 to explicitly link the need for a reasonable and necessary support to an impairment that meets the disability or early intervention requirements, there only needs to be a causal connection between a need for support and an impairment that meets access requirements.[4]
as well as giving effect to various of the recommendations contained in the 2023 Independent Review into the National Disability Insurance Scheme.
The Bill has five schedules and 109 pages.
Some of the more interesting provisions include:
Defining functional capacity
Item 4 of section 1 of the Bill adds a new section 9B to the National Disability Insurance Scheme Act 2013 (the Act) to define a person’s functional capacity as their:
ability to undertake the activity without assistance from other people, assistive technology or modifications in a context that excludes as far as possible the impact of the person’s ‘environmental and personal circumstances’.
The explanatory memorandum makes the observation that:
The requirement to assess functional capacity excluding the environmental and personal circumstances, as much as possible, intends to confine the assessment to the person’s intrinsic ability to undertake an activity. This approach avoids reliance on personal and external factors that may vary between individuals and are not attributable to the impairment, such as financial means or living arrangements. This promotes a more objective and consistent assessment of the functional impact of the person’s impairment.[5]
Rules may be made in relation to any matter regarding the definition of ‘functional capacity’’ and may prescribe methods or criteria to apply classifications or thresholds relevant to the assessment of functional capacity, including matters that ‘may, must or must not be taken into account when assessing functional capacity or circumstances in which a matter is taken to exist or to not exist in relation to assessing a person’s functional capacity’
They are expected to commence from 1 January 2028.
The explanatory memorandum makes the observation.that:
Further work is required to identify appropriate functional capacity assessments which can be used to assess functional capacity in the NDIS access process. The definition of functional capacity will support future work to develop a robust framework to define and determine appropriate thresholds for substantially reduced functional capacity. It will also guide the use of functional capacity assessments by the Agency to deliver a more structured and consistent application of the legislative criteria of the Act.[6]
Comment
It can be anticipated that in practice a significant body of Rules will be necessary to ensure consistent interpretation of the functional capacity content.
It can also be anticipated that review bodies will need to conduct lengthy reviews if a decision is made by the NDIS to reduce access because of the individual’s ‘environmental or personal circumstances’. Whether these circumstances have a relevant ‘impact in this context is very much a question of fact and degree.
Reasonable and necessary supports
Part 6 of the Bill repeals the NDIS’ current principles governing how plans for participants are developed.
As the explanatory memorandum says:
Amendments made by this Part also incorporate consideration of Scheme sustainability more directly into decision making. This is achieved through amendments to the objects and principles of the Act to embed Scheme sustainability considerations, to make sure the NDIS remains viable, effective and affordable.
This Part also strengthens the considerations the CEO must make when determining whether a support is ‘reasonable and necessary’ by inserting specific value for money considerations, effective and beneficial considerations, and family support considerations. These are currently factors in the Supports for Participants rules but will be strengthened by inclusion in the primary legislation.[7]
The Bill proposes adding to subsection 17A(3) of the Act ,which sets out what the NDIS CEO needs to consider when developing a participant plan:
- where relevant, respect the role of family, carers and other persons who are significant in the life of participants; and
- where relevant, recognise and respect the relationship between participants and their families and carers; and
- support communities to respond to participants’ individual goals and needs.
A new section 17B is then added to the Act which add principles relating to scheme sustainability.
These include only funding supports for participants to meet disability support needs that arise directly from impairments, the ‘desirability of supporting communities to respond to the goals and needs of participants’ (sic) and the financial sustainability of the Scheme.
Principles are also added providing that participants should be responsible for their ‘day-to-day living costs’, that funding should be used efficiently and the distribution of funding, across participants as a whole, should be equitable having regard to similarities in needs and circumstances.
The explanatory memorandum says as relevant:
Proposed new subsection 17B(2) provides that considerations relevant to the performance of the CEO’s functions and exercise of the CEO’s powers include the following:
- the NDIS is to fund supports for participants to meet disability support needs that arise directly from impairments in relation to which participants meet the disability requirements or early intervention requirements. This reflects and expands the application of the amendments made by Part 8 of this Schedule.
- the desirability of supporting communities to respond to the goals and needs of participants. The NDIS was never designed to replace ordinary community supports which are critical, as strong community capability helps participants achieve their goals more sustainably and inclusively. In addition, participants often do better when informal supports, including family, peers, clubs, employers and local services play a role alongside funded supports.
- the financial sustainability of the Scheme, having regard to reports of the Scheme actuary under Part 6A of Chapter 6. This is achieved by only providing supports that are necessary, effective and good value and by preferring options that achieve the participant’s goals at the lowest reasonable cost while still being safe and appropriate.
Subsection 17B(3) will provide that participants should be responsible for day-to-day living costs, including costs incurred whether or not a person has a disability. The NDIS is intended to fund only disability related supports, not the ordinary expenses that everyone has. The NDIS is not intended to be a form of social security or income supplementation. This principle will also protect the financial sustainability of the Scheme as ordinary living costs are large and ongoing. Covering them would significantly expand spending and reduce the Scheme’s ability to fund necessary disability supports for participants.
Subsection 17B(4) will provide that funding under the NDIS should be used efficiently and the distribution of Scheme funding should be equitable across participants as a whole, having regard to similarities in needs and circumstances. When funding is directed efficiently towards supports that are evidence-based, necessary and good value, more participants can receive supports that actually help them pursue goals and improve functional capacity, rather than funding being absorbed by ineffective, inefficient, duplicative or over priced items. Decision making should also be directed at building fairness and consistency so that participants with similar levels of functional impact should be treated consistently so that access to supports is not determined by factors like advocacy capacity or provider influence.[8]
Comment
It can be anticipated that there will be a significant number of reviews as to what constitutes a ‘directly needed’ support for an impairment as opposed to (one supposes) a ‘indirectly needed’ support, which would not be subsidised by the NDIS.
It will also be interesting how over the course of time the consideration of the role of families and community groups will lead to reductions of scope of a NDIS participant’s plan.
It will also be interesting to see what is characterised as being day-to-day living costs.
One assumes the ultimate question to be asked by the decision-maker is ‘is a particular cost only something to be paid expressly because of a participant’s impairment?’
It will finally be interesting to see how the financial sustainability object is applied in practice over and above the manner it is currently applied under the current legislation.
Tightening the concept of permanence
The Bill provides that an impairment is not permanent (or likely to be permanent) unless a person has taken all appropriate treatments, any other treatment is unlikely to materially improve, reverse or alleviate the impact of the impairment and the impairment is likely to last for a lifetime.
Access to early intervention is amended by requiring that early intervention requirements support the person in a way that ‘reduces’ the impact on the person’s impairment upon functional capacity in various areas rather than ‘mitigating’ or ‘alleviating’ the impact.
Appropriate treatment is defined as being treatment that is evidence based, can reliably be expected to materially improve, reverse or alleviate the impact of the impairment and is regularly undertaken or performed in Australia.
Rules can be made setting out what constitutes ‘all appropriate treatments’ for different classes of participants or impairments.
One example given the explanatory memorandum as to how this could operate is as follows:
Example – Soo
Soo is a 5 year old with a history of long term middle ear infections who lives with her mother in regional Australia. Soo’s mother has applied for her to access the NDIS providing an audiogram indicating a bilateral moderate hearing loss with no indication of sensorineural (permanent) components. Soo is on a waiting list to see an ENT specialist who visits children in her local area every second month.
Soo is found to not be eligible for the NDIS as there is not enough evidence that her impairment will be permanent and will likely persist for her lifetime. She has not yet undergone all investigations for potential treatment options that may improve, reverse or alleviate the impact of her impairment, including evidence-based, low-risk interventions such as grommets. The fact that she is living in a regional area where waitlists to see specialists are longer than in metropolitan areas is not able to be taken into consideration in determining whether Soo is eligible for the NDIS.
Her mother is informed that she can re-apply for the NDIS on behalf of her daughter, after further investigations and recommended treatment options are completed and if it is confirmed that her hearing loss is likely permanent and results in substantially reduced functional capacity.[9]
Comment
It can be expected that for many impairments, it will be a challenge to identify all available treatments that are used in Australia to treat or manage a particular impairment.
It is anticipated that the Rules developed for this area will need to be somewhat comprehensive.
In relation to the proposed changes to early intervention requirements, it will be interesting to see how courts determine how much of the concept of ‘reducing’ the impact of a person’s functional capacity will reduce access to early intervention, as opposed to the current tests of ‘mitigating’ or ‘alleviating’ adverse capacity.
Conclusion
The NDIS was designed as being a person-centred scheme.
One cannot escape the conclusion these provisions will make it much more a service or system centred one.
It will be interesting to see how the proposed changes pan out over time.
[1] Explanatory memorandum: 2
[2] Explanatory Memorandum:5
[3] Explanatory Memorandum: 198
[4] Explanatory memorandum: 206
[5] Explanatory Memorandum:15
[6] Explanatory Memorandum:14
[7] Explanatory memorandym:46
[8] Explanatory memorandum:48-49
[9] Explanatory Memorandum: 64-65